Is Nintendo Now Losing Money on Every 3DS Sold?

Now that Nintendo has dropped the price of its 3DS handheld to $170 (down from $250), the company may be taking a loss on every unit sold, based on comments from the company's CEO yesterday.

At a press conference in Osaka, Nintendo CEO Satoru Iwata said the price cut was necessary to improve the company's balance sheets this year and the next, Bloomberg Japan reported. From his comments, some sites are also reporting that Nintendo is now taking a loss on the 3DS hardware, though it's unclear if that's exactly what he said.

Based on a teardown, research firm IHS iSuppli said the total cost of parts and materials in a Nintendo 3DS is $100.71. With manufacturing cost factored in, it rises to $103.25. That doesn't mean Nintendo pockets $66.75 for every handheld sold, however, since it doesn't take into account the share for retail partners.

For electronics, the wholesale price of an item is said to be about half the retail price, which would mean Nintendo is selling the handheld to retailers for $85 a unit. If that's the case, that would mean Nintendo is selling the 3DS at a loss, but it's possible the company's retail partners are willing to settle for a lower share than normal if a higher volume of product can be sold.

The price cut, which goes into effect Aug. 12, is widely seen a response to sluggish sales of the 3D gaming device. Nintendo reported that it has sold 830,000 3DS devices since its March 27 launch. To appease early adopters who bought the handheld at full price, Nintendo is offering 20 free games downloads from the Nintendo eShop.

Will the price cut be enough to turn sales of the 3DS around before Nintendo's next major launch, the Wii U in 2012? And did the 3D capabilities of the 3DS actually hurt, rather than help sales? Those are the questions that Nintendo faces now as it's forced to rethink its portable gaming strategy, especially with Sony's PlayStation Vita set for a holiday debut.

Nintendo didn't respond immediately to a request for comment, but eventually told PCMag that it wouldn't discuss "internal business practices."